TCS Applicability – TCS on Scrap, TCS Return, Provisions

What is TCS?

Tax Collected at Source is known as TCS. It means tax being collected from the source by the seller (collector) from the buyer (Collectee/payee) for goods traded under section 206C(1) of Income Tax Act, 1961. TCS is collected when acquired or when paid whichever is earlier.

TCS Exemptions

If the buyer purchases the specified goods, not for the trading but using for the purpose of production of articles or goods, manufacturing, processing, then no tax will be deducted from that buyer.

The tax is exempted if the buyer gives a declaration for above use, in duplicate in Form 27C to the seller.

The tax is exempted if the seller shall deliver one copy of form 27C from the buyer to the Chief Commissioner/ Commissioner of Income Tax.

TCS Applicability

Tax collected at source is applicable to any business or trade dealing with alcoholic liquor, forest produce, scrap, etc. It also includes lease, license, or contract related to parking lots, toll plaza, mines, and quarry, etc as defined in section 206C of Income Tax Act, 1961.

TCS on Scrap

Scrap means waste. The damaged materials obtained from manufacturing units that are of no further use. Here you can check the following material which is not covered by the Scrap.

The waste that is arising from newspapers, scrapped, packing material, old machinery, etc. which are not produced for the manufacture.

The By-products generated from the manufacturing process as the same could be used as such.

Example:

Mr. Srikanth is in the business of UPS battery (trading). They buy the old batteries from customer and inturn sell them as “SCRAP” to others. Is TCS applicable on such Sale?Answer: Here Mr. Srikanth is buying old batteries, it means the batteries that are already scraped and not for any use. Here he is reselling the Scrap. Already we have seen above that which materials are considered as scrap. So in my view, TCS should be applicable as per the Income Tax Rules, 1961. Anyway, check if the buyer is buying for purposes of manufacturing or for his personal consumption but not for trading purpose. If the above conditions are satisfied in your case no need to collect TCS or else TCS will be collected.

Municipal transport in maharahtra has sold its scrap buses to Dealer (1) , and also charged TCS @ 1%.
Dealer (1) further sold those scrap buses to a Dealer (A trader in scrap). Whether TCS should be deducted by Dealer (1) while the sale to Dealer (2) ?

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